PAKISTAN INTERNATIONAL AIRLINES CORPORATION Versus CENTRAL BOARD OF REVENUE, ISLAMABAD

1. SAEEDUZZAMAN SIDDIQUI, J.‑‑ We propose to dispose of the above‑noted seven petitions filed by M/s. Pakistan International Airline Corporation by a consolidated order as the points of law and facts raised in the above petitions are common.

2. The Air‑conditioning System which is subject of dispute in the above petitions was imported by the petitioner in seven different consignments. These consignments arrived at Karachi between February, 1974 to May, 1975 and were cleared from Customs without payment of customs duty under Standing Order No.39/66 dated 5th July, 1968. At this stage we may mention the respective dates of arrival and clearance of goods in each petition and as these dates are relevant for decision of one of the contentions raised by the learned counsel for the petitioner. In Petition No. 731 of 1981 the goods arrived at Karachi Port on 17‑5‑1975 and were allowed clearance on 20th May, 1975, in Petitions Nos. 800 of 1981 to 805 of 1981 the respective dates of arrival of the consignments are 20‑7 1975, 18‑11‑1974, 8‑7‑1974, 23‑5‑1974 and 8‑2‑1974, while the dates of their respective clearance from customs are 31‑7‑1975, 16‑5‑1975, 21‑11‑1977, 2‑9‑1974, 26‑6‑1974 and 14‑2‑1974. The petitioner was issued show‑cause notices by respondent No.3 in respect of the above consignments on 8‑4‑1976. In the show cause notice it was alleged that the clearance of above consignments consisting of Air‑conditioning System imported by the petitioners under Standing Order No.39/66 was not correct as Air‑conditioning System imported by the petitioners was not covered under the aforesaid Standing Order as ground equipment for handling of passengers. The petitioner contested the above show‑cause notice and inter alia pleaded that the Air‑conditioning System installed by the petitioners in the International Transit Lounge at Karachi Airport was meant for catering the needs of arriving and departing passengers and as such it fell within the category of ground equipment meant for handling of passengers and qualified for clearance without payment of customs duty and sales tax under Standing Order No.39/66. It is an admitted position in the case that the Air‑conditioning System imported by the petitioner and installed at the Karachi Airport International Transit Lounge was a part of arrangement arrived at between the petitioner and the Government of Pakistan which required the petitioner to bring the facilities at the International Transit Lounge at Karachi Airport at par with the facilities available at other International Transit Lounges elsewhere in the world. The case of the petitioner throughout has been that under the above arrangement it imported the Air‑conditioning System for installation at Karachi Airport in the International Transit Lounge to afford facilities to transit passengers who pass through Karachi Airport. It is also contended by the learned counsel for the petitioner that the area where Air‑conditioning System is installed falls within the customs bounded area and as such no duty is payable on any goods kept or stored in the said area. The respondents Nos.1 to 3, however, did not accept the contention of the petitioner on the sole ground that the Air‑conditioning System imported by the petitioner did not fall within the category of ground handling equipment shown in the list attached with the Standing Order No. 39/66. The petitioner has produced letter dated 24‑1‑1969 addressed by C.B.R. to Collector of Customs, Karachi, attaching a list of item which can be cleared without payment of Customs duty as part of ground handling equipment. It is not disputed before us that the list attached with the above letter is treated by Customs Authorities as list attached with Standing Order No. 39/66. 1t reads as follows:‑‑

"GOVERNMENT OF PAKISTAN

CENTRAL BOARD OF REVENUE

3. S.No. 2 (91)‑SS (Cus‑Ex)

68. ISLAMABAD THE 24TH JAN. 1969

4. To;

5. The Collector of Customs, Custom House, Karachi/Chittagong.

6. The Collector of Central Excise & Land Customs, Lahore/North Zone, Chittagong.

7. Subject: Import of Ground Handling Equipment Exemption from Duty.

8. In pursuance of the recommendation of the ICAO's Facilitation Division, and in exercise of the powers vested in it by Section 23 of the Sea Customs Act, Section 7 of the Sales Tax Act, the Central Board of Revenue is pleased .to direct that ground handling equipment be exempted from the import duties and taxes leviable thereon, when imported by foreign airlines operating scheduled Flights through Pakistan for use within the premises of an approved International Airport.

(2) An illustrative list of the equipment is attached but Collectors of Customs will be competent to allow any item of equipment not shown in the list which they are satisfied is essential in handling either cargo or passengers or in maintenance/repair of aircrafts, free entry.

(3) Collectors will prescribe a suitable procedure to ensure a proper control over the equipment imported free.

(4) Duties and taxes will be payable at the appropriate rates if equipment imported duty free is diverted for use other than for the purpose for which they were imported.

(5) This order supersedes all previous orders on the subject.

BY ORDER OF THE

CENTRAL BOARD OF REVENUE

9. A. Q. AIDRUS

SECOND SECRETARY"

10. LIST OF DUTY FREE: GROUND HANDLING EQUIPMENT

PART I

BATTERIES AND CARTS

11. PART 1I

PLATFORMS AND STEPS

PART III

GROUND RADIO EQUIPMENT

PART IV

PASSENGER HANDLING EQUIPMENT

(1) Passenger Loading Steps, Platforms and parts thereof.

(2) Specialised Passenger Weighing Devices and parts thereof.

(3) Propeller Guards (Fences).

(4) Motorised Passenger Steps and parts thereof.

PART V

CARGO HANDLING EQUIPMENT

PART VI

SPECIALISED CATERING EQUIPMENT

PART VII

ALL REPAIRS AND MAINTENANCE

MATERIAL FOR AIRFRAMES

PART VIII

ALL REPAIRS AND MAINTENANCE MATERIAL

FOR INSTRUMENTS

PART IX

ALL REPAIRS AND MAINTENANCE

MATERIAL FOR ENGINE

1. Special Tools.

12. ..

13. ..

14. Learned counsel for the petitioner contends that the list attached with the letter dated 21‑1‑1969 is only an illustrative list of those equipments which could be cleared from the customs without payment of customs duty and sales tax but it is not exhaustive as the Collector of Customs in each case where it is urged before him that a particular item imported falls within the category of ground handling equipment, he has to decide the same by exercising his discretion after taking into consideration all the facts. It is accordingly urged by the learned counsel for the petitioners that the rejection of the plea of the petitioners by the respondents on the sole ground that the Air‑conditioning System imported by it did not fall within the list of the items shown in the list attached with Standing Order No.39/66 as passenger handling equipment was arbitrary. The second contention of the learned counsel for the petitioner is that the consignments under dispute having been cleared from the Customs between the period from 14‑2‑1974 to 31‑7‑1975 the issuance of show‑cause notice on 8‑4‑1976 was wholly without jurisdiction as the notice was clearly time‑barred under section 32 (3) of the Customs Act which prescribed a maximum period of 4 months (at the relevant time) for issuance of such notices. Learned counsel for the respondents, on the other hand, supported the orders of the respondents and contended that as there was no specific mention of the Air‑conditioning System either in the Standing Order 39/66 or in the list attached with the letter dated 24‑1‑1969 it could not be said that the decision taken by the respondents in demanding customs duty on the import of Air‑conditioning System was neither arbitrary nor contrary to the terms of the Standing Order No. 39/66. We do not feel it necessary to decide the first contention of the learned counsel for the petitioner in the above case as in our view this petition can be conveniently disposed of on the basis of the second contention of the learned counsel for the petitioner. The show cause notices were issued to the petitioner on 8‑4‑1976 in the above cases. From the orders of respondents Nos1 to 3 it is quite clear that there was no allegation of any fraud, misrepresentation or false declaration by the petitioner at the time of obtaining of clearance of consignments of Air‑conditioning System from customs without payment of customs duty and sales tax. From the orders passed by respondents Nos. 1 to ,3 in the case it is apparent that it was a case of error or inadvertance on the part of the Customs Authorities in allowing release A of consignments without recovery of customs duty and sales tax on the assumption that Air7conditioning system imported by the petitioner fell within the category of ground handling equipment. The relevant provision of the Customs Act which was applicable in such situation wets section 32 (3) of the Customs Act which reads as follows:‑‑

15. "Section 32(3).‑‑Where, by reason of any, inadvertence, error or misconstruction, any duty or charge has not been levied or has been short‑levied or leas been erroneously refunded, the person; liable to pay any amount on that account shall be served with a notice \6thin four months of the relevant date requiring him to show cause wily he should not pay the amount specified in the notice."

16. A reading of the above provision .of law will clearly show that tinder subsection (3) ,of ,section 32 where by reason of any inadvertence, error or misconstruction on the part of the Customs Authorities any duty or charge hits not been levied or has been short levied or has been erroneously refunded, a notice may be sent to, the person concerned who. is liable to pay tire amount El calling upon him to show cause why the duly which has not been paid or which has been short paid or, which, has been erroneously refunded should. Not be paid by him. Such notice could be issued by the Customs Authorities within four months of the `relevant date' (this period of four months has now been extended to six months by Finance Ordinance of 1982). The 'relevant date' is defined in sub4pction (5) of section 32 ibis and in the present case it is the dale of clearance of the goods from the customs., We have already mentioned above the ,dates of clearance of the above consignments from the customs. It is quite clear that the notice dated 8‑4‑1976 issued to petitioner in the above cases, were much after expiry of four months period prescribed under subsection (3) of section 32 of the Act. Learned counsel for the respondents is unable to advance any argument in support of the validity of' the show‑cause notice issued by the respondent No.3 to the petitioner. As the notices issued by respondent No.3 to the petitioner were beyond time all orders passed by respondents on the basis of these notices were void. We accordingly accept the above petitions and declare the order, passed by respondents Nos. 1 to 3 as without lawful authority and of no legal effect. There will be no order as to costs.

17. Mr. S.A. Sarwana, learned counsel for the petitioners prayed that tile bank guarantce furnished by the petitioner in the above cases may be However, in order to enable the respondents if they so desired to File an appeal against the above order before Supreme Court we direct that the bank guarantee furnished by the petitioner shall stand discharged after two months from today.

18. M.Y.H/P‑120/K Petition allowed.